Motorola' s profit warning

Publié le par Jean Arnal


Bad time for Motorola. Motorola revised its 1Q07 and 2007 guidance this week. What is to blame is lower than anticipated sales and operating earnings at the company's Mobile Devices business, while the Network &

Enterprise and Connected Home Solutions businesses continue to perform in line with the company's expectations. Motorola immediately announced a series of actions to restore profitable growth and enhance shareholder value. Some people were fired: David Devonshire, current CFO, will quit and will be replaced by Thomas J. Meredith; Greg Brown is appointed as President and COO. Zander, Motorola CEO, found unacceptable the performance of its Mobile Devices business. As part of the actions, Motorola announced accelerate repurchase of $2bn of common stock and an increase to the existing share repurchase program to $7.5bn. Shareholders are a key element. Nevertheless, shares tumbled 6.6% after the announcement, following a 29% drop between October and February. The share is at its lowest level for the last 21 months, and most analysts rushed to downgrade the company's stock.

What are the perspectives. For 1Q07, Motorola should report a loss in mid-April, with sales down $1bn to $9.2bn-$9.3bn. For the year, it expects overall sales, profitability and operating cash flow to be substantially below prior guidance. As a consequence, layoffs are part of the actions. 3,500 were already announced, but it is not the final figure. Several analysts claim it will take Motorola more than one year to turn around its handset business. So Motorola should be in turbulences for a while.

Publié dans Top stories

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